The Supreme Court on Monday upheld the validity of Vidhayak Nidhi Scheme in Uttar Pradesh, which provides for annual budgetary grants to Members of the Legislative Assembly and Legislative Council for facilitating development work in their constituencies.

A three-judge bench of Chief Justice TS Thakur, Justice AM Khanwilkar and Justice DY Chandrachud said the elected representatives had a vital role in democracy.

“....the Vidhayak Nidhi Scheme does not per se violate Article 243ZD or the UP Planning and Developmental Act, 1999. Elected representatives have a vital role in democracy. They have an intrinsic connection with their constituencies and have a legitimate role to discharge in meeting the development needs of their constituencies. Article 243ZD does not exclude their role. On the contrary, they perform a supplemental role by enhancing and supporting the work of the institutions of local self-governance,” the judgment stated.

The UP government introduced the scheme known as Vidhayak Nidhi Scheme in the State Budget in 1998-99, with an allocation of Rs 50 lakh for every Member of the Legislative Assembly and Legislative Council.

In the Budget of 2000-01, the allocation under the scheme was enhanced to Rs 75 lakh.

The appellant moved the high court in its writ jurisdiction in 2004 seeking to challenge the constitutionality of Vidhayak Nidhi Scheme and for obtaining an order restraining the state from enhancing the budgetary outlay from Rs 75 lakh to Rs 1 crore per MLA/MLC, as was proposed.

The appellant submitted that if the challenge to the validity of the scheme is not accepted, then in the alternative, the money allocated under the scheme should be permitted to be utilised only for meeting the expenditure on schemes which have been sanctioned under the district plan pursuant to the provisions of Article 243ZD and the UP District Planning Committee Act, 1999.

The Allahabad High Court, by a judgment and order dated 13 May, 2013, dismissed the writ petition under Article 226 of the Constitution.

But, it emphasised the need for ensuring accountability in regard to public moneys and to the duty of the state to take all possible steps to prevent their misuse.

The division bench noted that the “murmur against perceived misuse of Vidhayak Nidhi is becoming more audible”.

It was in this view that a direction was issued to the principal secretaries in Planning and Development Department and in Legislative Department to take heed of the suggestions of the appellants with “sincerity and promptitude”.

The Supreme Court noticed that the principles which were formulated in the judgment of the Constitution Bench in Bhim Singh Case (whereby the Supreme Court upheld the validity of Members of Parliament Local Area Development Scheme-MPLAD) were not even been noticed nor was any attempt made on the part of the state government to ensure that the guidelines that govern the Vidhayak Nidhi Scheme were brought in consonance with the provisions of Parts IX and IXA of the Constitution and the observations contained in Bhim Singh judgment.

Hence, the Supreme Court directed to follow the following safeguards while implementing the scheme:

(i) the role of the elected representatives would be to recommend the work of a developmental nature in their constituencies within the budget allotted under the scheme;

(ii) the feasibility of the work, estimate of funds, selection of the implementing agency and supervision of work must be independently determined by a nominated authority or body of the state government;

(iii) panchayati raj institutions in rural areas and municipal bodies in urban areas may be considered as preferred implementing agencies having regard to the entrustment of responsibilities under Parts IX and IXA of the Constitution;

(iv) the plans prepared by the District Planning Committees under Article 243ZD read with the UP District Planning Committee Act, 1999, may be made available by every district Collector to elected representatives to enable them to decide whether any developmental work which has already been identified in the above plan should be executed in pursuance of the funds made available under Vidhayak Nidhi Scheme;

(v) sufficient safeguards should be provided to ensure against conflicts of interest such as the allocation of funds to institutions controlled by an elected representative or a member of his or her family; and

(vi) The scheme must include sufficient safeguards to ensure financial transparency, such as proper supervision of work, monitoring quality and timely completion besides procedures to ensure proper audit and utilisation of funds.